Alibaba: Why You Need To Rethink Your Omnichannel Approach

By Girish Pai, AVP, Group Manager, Retail, CPG and Logistics for Infosys

Ali Baba is a literary character from the Arabian Nights stories known for his ability to get virtually anything he wants by shouting “Open Sesame!”

The China-based Internet retailer of the same name is ready to display some magic of its own this summer when it stages an initial public offering that could very well go down as the largest in history. The billions of dollars the company is expected to raise from its Western IPO will allow Alibaba to get a strong foothold in the lucrative North American market … without having to shout anything.

Alibaba accounts for 80% of that country’s online revenues. As part of its ambitious plan, Alibaba has bought a stake in the luxury e-commerce site 1stDibs, the mobile messaging app Tango, and the mobile peer-to-peer ride sharing app Lyft. More recently Alibaba announced it was paying nearly $200 million for a 50% stake in China’s top soccer team, Guangzhou Evergrande.

To an outsider who’s unfamiliar with the incredibly competitive e-commerce sector, it might appear that Alibaba purchases companies and other business entities with reckless abandon. Far from it. Every move that Alibaba makes is part of a well conceived strategy. The investment in Guangzhou Evergrande is likely all about advertising and media rights. Lyft is probably an attempt to own a growing delivery network in urban areas. In other words, Alibaba keeps things smart and savvy, yet elegantly simple, while it expands its business empire. And its ability to figure out how to enter new markets and create new revenue streams while maintaining phenomenal profit levels is unparalleled.

It also helps that Alibaba processes billions of dollars in mobile payments and runs its own Cloud platform. The infrastructure and strategy are there – now they’re counting on Americans to buy products online and go to a physical store to pick them up. What the world is waiting to see is if Alibaba can change the way North Americans approach Web commerce. Buying things online and traveling to a store (or even a kiosk) to pick them up is not a huge part of the way North American consumers purchase things online. That method accounted for just 1.2% of all Internet retail transactions last year.

Needless to say, Alibaba sees some room to grow in that space. They’ve already demonstrated this by investing in Intime Retail, a Chinese Department store operator, to focus on developing online-to-offline business in shopping malls, department stores, and supermarkets in China. It is not unreasonable to expect Alibaba to perfect the “reverse-showrooming” model in China before eventually introducing it to North America. Supposing that this innovative Chinese powerhouse, buoyed by billions of dollars from an IPO, is able to increase its share of online-to-offline business in the West, retailers here should be ready for some startling market transformations.

That’s why it’s a good time to rethink just how your store’s omnichannel strategy works. Is it ready for an Alibaba-style shift to online-to-offline sales? If configured properly, the shift shouldn’t even matter. That’s because the right solutions give a retailer an accurate view of inventory across stores and the Web — no matter the location of the purchase and pick-up.

To get a sense of how retailers can up the game this summer, check out the ingenious pick-up strategy at the New England grocery chain Stop & Shop. Of course, Stop & Shop already owns Peapod, a very successful online grocery service. But what the store is piloting is something a bit different. Stop & Shop has figured that a certain percent of its customers care a lot about convenience and often don’t have the time to stop at the store.

Stop & Shop is placing pick-up stations — basically refrigerated boxes, manned by an hourly employee — in the corners of parking lots, at large shopping malls, and other locations that tend to have less traffic congestion than at your local supermarket. More importantly, it’s on your drive home from work. You chose a slot within a short window somewhere in late afternoon to pick up your groceries. A van from the nearest store drops off all the orders in that refrigerated box. You drive up and tell the attendant your phone number and he gives you your groceries. You haven’t left your car and grocery shopping is done!

This sort of retailing e-commerce system works because it takes a comprehensive approach to inventory visibility. It doesn’t matter where the customer buys the goods but just that the store can instantly fill the order and all she needs to do is show up to take them away. What we don’t see behind the scenes is the robust yet flexible back-end business processes, order and inventory information, in-store coordination, and customer communications coming together in a seamless way to bring her order to the pick-up station.

These are elegantly simply approaches to e-commerce, and Stop & Shop, Alibaba, and others are going to use them to revolutionize omnichannel retailing. Retailers that have an accurate view of their inventories across stores and distribution centers will be able to make a seamless transition to the new online-to-offline method.

As Amazon experiments with unmanned drones that drop off packages in your front yard just hours after you’ve bought stuff, I believe that retailers who invest in robust back-office capabilities to offer simple yet innovative options to customers will win. Don’t hold your breath waiting for an unmanned delivery drone anytime soon. Or magic carpets from the Arabian Nights, for that matter.

Girish Pai, AVP, group manager, retail, CPG and logistics for Infosys can be reached at askus@infosys.com.

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